Shared Facilities Agreements in Condos: Everything You Need to Know

What is a Shared Facilities Agreement (SFA) in Condominiums?

An SFA is a legal agreement between a Condominium Corporation and/or other parties that governs conduct on an area that is shared between the parties. It defines the repair responsibilities, cost sharing, rules, dispute resolution, and much more. Many corporations will elect a committee, or the property manager will be responsible to oversee the operations of the SFA. Separate budgets, bank accounts, chargebacks, reconciliations, and even Reserve Fund Studies may be required depending on the size of the shared facilities. It is important to note that status certificates must include information about the SFA including relevant By-Laws any reserve fund study notices.

Dispute Resolution Between the Parties

Shared Facilities Agreements typically include a clause about dispute resolution. It outlines the need for negotiation between parties as a first step. If this fails, then mediation by a neutral third party is next. Lastly, arbitration as a binding resolution process which can get expensive.

A self-help remedy allows a party to take action to address a failure by another party without needing court intervention. This provision is useful when one party neglects its obligations, such as refusing to complete necessary repairs. If this occurs, the other party may step in, complete the work, and recover the costs from the defaulting party.

Common Issues arising from a Shared Facilities Agreement

Unanimous decision-making may lead to deadlock. A Shared Facilities Agreement often requires each party to vote for certain decisions. While this ensures that each Condominium has a say, it also creates a significant risk of deadlock, where no decision can be made because one party refuses to agree.

Disparity of usage may lead to disagreements over cost allocation, maintenance, and fairness. Certain parties may use the shared facilities significantly more than others. This can create financial and operational tensions between the condominiums. For example, a commercial unit may consume more utilities and elevator usage than residential condominium owners, but costs are still split evenly.

Another common issue is the boundaries of the shared facilities may be undefined, which could cause issues when determining cost sharing, maintenance responsibilities, and liability.

Closing Remarks

Most Shared Factilties Agreements are poorly written, overly complex, and often missing critical details which makes it unfair to expect volunteer condo directors to decipher them. Instead of getting lost in lengthy agreements, focus on encouraging parties to negotiate. It won’t ever be 100% fair but that’s reality.

When disputes arise, the best approach is to bring in engineers to assess the situation and settle disagreements objectively. If tensions escalate, consider hiring a neutral third-party company to define what should be shared or how costs should be split to ensure no one gets an unfair advantage. Ultimately, engaging a condominium management company and legal counsel to renegotiate the agreement is the smartest move. A well-structured cost-sharing arrangement protects all parties and prevents one corporation from exploiting another.